TaxTMI 
TaxTMI 
2015 (12) TMI 593
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....APPL No. 16499/2014 (for delay) in CEAC 75/2014 CM APPL No. 16502/2014 (for delay) in CEAC 76/2014 CM APPL No. 16505/2014 (for delay) in CEAC 77/2014 CM APPL No. 16500/2014 (for delay) in CEAC 78/2014 CM APPL No. 16511/2014 (for delay) in CEAC 79/2014 CM APPL No. 16514/2014 (for delay) in CEAC 80/2014 CM APPL No. 16517/2014 (for delay) in CEAC 81/2014 CM APPL No. 16521/2014 (for delay) in CEAC 82/2014 CM APPL No. 16523/2014 (for delay) in CEAC 83/2014 CM APPL No. 16527/2014 (for delay) in CEAC 84/2014 CM APPL No. 16530/2014 (for delay) in CEAC 85/2014 CM APPL No. 16533/2014 (for delay) in CEAC 86/2014 CM APPL No. 16536/2014 (for delay) in CEAC 87/2014 CM APPL No. 16539/2014 (for delay) in CEAC 88/2014 CM APPL No. 16542/2014 (for delay) in CEAC 89/2014 CM APPL No. 16550/2014 (for delay) in CEAC 90/2014 1. For the reasons stated therein, the delay in filing the present appeals are condoned. 2. The applications are disposed of. CEAC Nos. 62/2014, 73/2014, 74/2014, 75/2014, 76/2014, 77/2014, 78/2014, 79/2014, 80/2014, 81/2014, 82/2014, 83/2014, 84/2014, 85/2014, 86/2014, 87/2014, 88/2014, 89/2014 & 90/2014 3. These appeals under Section 35G of the Central Excise Act,....
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....nducted at various dealers of VCPL in various cities. The first search on 5th July 2003 7. According to the Department, the searches resulted in the recovery and seizure of incriminating records or documents from such premises which was annexed to the respective panchnamas drawn on the spot by the search team. The documents recovered pertained to the period from 1st April 2002 to 5th July 2003. The officers of the DGCEI also seized finished goods/Vimal brand gutka at several places since valid documents showing the payment of duty were not available in respect of the finished goods. They also seized raw materials/inputs and packing materials from the factory of VCPL and other places, including godowns of some of the transporters and their vehicles. The quantities of inputs found in excess of the recorded balances were in respect of both supari and tobacco. It was further observed that no account was being maintained in the factory in respect of other inputs and packing material. In the absence of any stock register for these inputs or packing material, the actual physical balances were recorded under the panchnama drawn and the goods found unaccounted were seized. No stock of eit....
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....ness premises of M/s. Kamal Store and M/s. Gobind Store, Jaipur should not be raised against VCPL. The SCN also proposed confiscation of 9356 kgs of supari, 466 kgs of tobacco, 1200 kgs of gutka mixture, printed packing laminates weighing 6355 kgs, 404000 pieces of poly pouches, 5450 cotton (canvas bags) and other inputs and packing materials. 10. Annexed to the SCN was the report of the Shri Ram Institute of Industrial Research (SIIR), the findings of which when compared with the consumption of various raw materials as shown by VCPL in its records, revealed that there was excess consumption of supari and menthol, the two essentials ingredients of gutka. 11. The SCN had noted that VCPL had voluntarily deposited a sum of Rs. 6,93,000 towards payment of duty on 210 bags of Vimal gutka seized on 9th July 2003 and total of Rs. 1.96 crore voluntarily deposited on 5th July 2003, 15th July 2003 and 4th August 2003 towards duty not paid on past clearances. It also proposed to appropriate the said deposits towards the duty demand of Rs. 12,92,90,241. 12. The SCN proposed confiscation of other seized materials and imposition of penalties against each of the other noticees under Rules 25 a....
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....f Rs. 20 lakhs was imposed on M/s. Santosh Tobacco for receiving, storing and selling clandestinely removed 2267 bags of Vimal brand gutka. 16. However, the CCE dropped the proceedings related to the seizure of 9356 kgs of supari, 466 kgs of Tobacco, 1200 kgs of gutka mixture, printed packing laminates weighing 6355 kgs, 404000 pieces of poly pouches, 5450 cotton (canvas bags) and other materials from the factory of VCPL. The proceeding against Ashoka Tobacco relating to seizure of 27382 kgs of unbranded loose chewing tobacco and other materials was also dropped. The proceedings against M/s. Lalwani Convertors relating to seizure of 4135 kgs of flexible laminated film were also dropped. 17. As regards the second SCN dated 1st March 2004, the CCE by order dated 21st November 2005 confirmed the duty demand of Rs. 2,75,15,400 and imposed a penalty of an equal amount apart from interest against VCPL; imposed a penalty of Rs. 1 crore against Mr. H. Sunder; Rs. 5 lakhs each on Mr. R.K. Tripathi and M/s Gopi Roadlines; a penalty of Rs. 10 lakhs on Paramjeet Singh Kakkar, proprietor of Singhal Transport Co.; a penalty of Rs. 15 lakhs on M/s Laxmi Freight Carrier Pvt. Ltd.; and Rs. 1 lakh....
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.... from Mr. Lakshmi Prakash Gupta of Seoni, redemption fine in respect of them and penalty on Mr. Gupta was set aside. The appeal filed by Mr. Lakshmi Prakash Gupta was allowed. (viii) The confiscation of printed plastic laminates seized from M/s. Pragati International, Delhi, redemption fine in respect of the goods and penalty on M/s. Pragati International was upheld. The appeal filed by M/s. Pragati International was dismissed. (ix) The imposition of penalty on M/s. Santosh Tobacco was set aside and the appeal filed by them was allowed. (x) The appeals filed by the Department were dismissed. In respect of the appeals arising from the second SCN, the CESTAT: (xi) set aside the duty demand of Rs. 2,75,15,400/- against VCPL, interest thereon under Section 11AB and penalty on them under Section 11AC. The penalty under Rule 26 of the CE Rules on Mr. H. Sunder was also set aside. (xii) The penalty under Rule 26 of the CE Rules on M/s. Laxmi Freight Carriers (P) Ltd., Mr. Gopal Krishan Parashar, Mr. Paramjit Singh Kakkar, Proprietor, M/s. Singhal Transport Company and Mr. R.K. Tripathi of VCPL were set aside and as such, the appeals filed by them were allowed. (xiii) The penalty un....
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....y of the assessee to manufacture such a huge quantity. There was no evidence on record as regards procurement of such huge raw materials. The Department also failed to record the statements of the workers of VCPL who were engaged in the actual manufacture and packing of the gutka/pan masala. In most of the cases; no buyers were identified and where the buyers were identified either no inquiry was conducted with them (the cases of M/s. Santosh Tobacco and M/s. Gupta Chemical Works) or if inquiry was conducted, they denied having received the consignments of gutka through the transporters mentioned above. The confirmation of demand of duty based upon half written ambiguous records of third parties was not in accordance with law. The present appeals 21. In the present appeals by the Department the questions sought to be urged are as under: (i) Whether statements recorded under provisions of Section 14 of CE Act by the officers of the Department can be taken as proof of the statutory violations by the Respondents? (ii) Whether demand of duty based on the third-party documents supported by corroborative statements was not justified? (iii) Was the CESTAT justified in setting asid....
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....e to the evidence on record. Dr. Jain also handed over the Court tables and charts which were prepared and submitted by the Respondents before the CESTAT when the appeals were argued there. Scope of judicial review in the present proceedings 25. Since the main plank of the Department's appeals against the order of the CESTAT is that of perversity, it is necessary to recapitulate the legal position in this regard. The appeal to the High Court under Section 35G of the CE Act, arising from the order of the CCE, is a second appeal, the first being to the CESTAT. Unless there are substantial questions of law that arise, an appeal would ordinarily not be entertained. 26. On findings of fact, ordinarily it is the CESTAT which would have the final say in the matter. A question of law would arise in that context only where it is possible to demonstrate (a) some vital piece of evidence which is material to the determination of the issues involved has been overlooked by the CESTAT or (b) where it is has made a patent error in appreciation of the evidence or misread the evidence on record. In Sree Meenakshi Mills Limited v. CIT (1957) 31 ITR 28 it was observed that a finding of fact is ....
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....Once the mixture was ready, it was packed in pouches made of plastic film which were heat sealed to avoid any leakage or the contents absorbing moisture. A reference is made to the analysis undertaken by the CCE in the order-in-original which tried to show that the explanation for the gap between 450 gm of menthol claimed by the Assessee to be present in the representative sample and 13 grams which was actually found in the report of the SIIR could not be attributed only to evaporation since it would then be 97.2% which was in the "realm of impossible." It is urged that all of the above evidence was overlooked by the CESTAT. 31. The Court finds that the CESTAT has considered the report of the SIIR and has examined carefully the evidence of Mr. Chib. It noted that the percentage of the contents of the mixture as declared by VCPL was 86% supari, 2.2% lime, 6% tobacco, 5% kattha and 0.47% menthol, which added up to 99.67%. The other ingredients were perfumes and substances which were less than 1%. The total of the percentage of these five ingredients in the report of SIIR, instead of being more than 99%, was only about 90%. This by itself, therefore, created a doubt as to its correct....
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....hat the Department was not required to prove beyond doubt each and every piece of evidence gathered. It was sufficient for the Department to adduce "only so much evidence, circumstantial or direct, as is sufficient to raise a presumption in its favour with regard to the existence of the facts sought to be proved." 36. It must be observed that the decision in Collector of Customs, Madras v. D. Bhoormull (supra) was specific to the provisions of Sea Customs Act, 1878 pertaining to smuggling. Although it is observed by the Court that this initial onus of proof on the Department can be sufficiently discharged by circumstantial evidence this was in the context of the fact that provision itself shifted the burden on the person in whose possession the contraband is found. As far as the CE Act is concerned, there is no such provision that raises a presumption and shifts the burden on to the person who is charged with clandestine removal of excisable goods. Section 14 of the CE Act provides for a detailed enquiry involving the gathering of evidence through documents and recording of statements. It does not dispense with the principles of natural justice or the general principles of fairnes....
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....o be first observed that there was no 'confession' as such by any of the noticees as to their involvement in the activities alleged against them in both the SCNs. The Department relied on the statements made by third parties including transporters, agents, and their employees. Where such statements are subsequently retracted or resiled from, it becomes necessary for the Department to produce other evidence which is of an independent nature which corroborates the retracted statements. 39. The CCE has in the Orders-in-Original proceeded to rely on the retracted statements or on statements of persons not offered for cross-examination by either disbelieving that they were obtained under coercion or by holding the persons who have retracted or resiled from the earlier statements as having done so under the influence of the noticees themselves. The CCE noted that the noticees had submitted a list of 20 such witnesses whom they wanted to cross-examine. The CCE observed: "Though it is a very large number and not very convincing grounds were given for their cross-examination, yet all the 20 witnesses were allowed and all of them were given two opportunities each (but) only 6 of them appear....
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....h some caution and ask what might be the case if the remaining witnesses were also produced for cross-examination? Importantly, what would be the prejudice caused to the noticees, in such circumstances, by their non-production for cross-examination? Thus a doubt is created in favour of the noticees when such witnesses do not turn up for cross-examination. It is the latter approach that has weighed with the CESTAT. That, in the view of this Court, was a possible approach and does not render its order perverse on that score. Canvas bags 44. Turning to some of the specific instances, as regards the allegation of excess consumption of unaccounted receipt of canvas bags, reliance was placed on the documents seized from M/s. Ram Lal Ram Chandra (India) Ltd. (RLRC), the case of the Department is that during the period from April 2002 to 4th July 2003, VCPL had received only 105000 canvass bags from RLRC. The allegation of excess receipt to the tune of about 510650 canvass bags was based on the entries in the gate register. However, as noted by the CESTAT, the delivery challans did not indicate that canvas bags, covered by the delivery challans had in fact been delivered to VCPL. The del....
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....ence of other positive evidence the mere fact that the goods seized from the transporters originated at the factory gate of VCPL or from the same source was not sufficient to establish that it was VCPL which was clandestinely clearing such consignments. The Court is not persuaded to hold that the CESTAT erred in the appreciation of evidence or failed to consider any material evidence in coming to the above conclusion. Goods seized from Singhal Transport 47. Relevant to the seizures effected from Singhal Transport Co., were the statements of Mr. Yogesh Sharma, Godown Incharge, Mr. Sita Ram and Mr. Mohd. Ilyas, drivers of trucks allegedly used in transporting the goods to its office. Mr. Yogesh Sharma and Mr. Sita Ram were not made available for cross-examination. An affidavit of Mr. Mohd. Iliyas was tendered in which he stated that he used to be approached by Mr. Dubey who was engaged by purchasers of gutka on cash basis. He stated in the affidavit that seizure of 40 bags from his tempo without bill was a sporadic event. 48. The other statement in this regard on which reliance was placed was of Mr. H. Sunder. The case of the noticees was that the statement made by him on 5th July....
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.... recorded. One employee of GG Carriers, Mr. Harjinder Singh, was examined. He mentioned the name of the booking clerks as Naresh Kumar and Vishnu but neither of them was examined. In his cross-examination, Mr. Harjinder Singh denied transporting gutka of VCPL. It was for the Department to explain why the entries in the documents were not further investigated by them and why someone in a responsible position in GG Carriers was not examined. It was for the Department to establish the link between such evidence and VCPL. If CESTAT was not prepared to rely on the above evidence, then certainly its approach could not be faulted. The production capacity 51. On the question of production capacity, what has come on record is that at the time of inspection 65 machines were found installed and 20 were found working beyond 5 pm. Although there were 120 machines in all, 65 were found to be operational. At the relevant time, what was declared to the Department by VCPL was 65 machines. As rightly pointed out by learned counsel for the noticees, and as accepted by the CESTAT, at the relevant time there was no bar against an Assessee having more machines than what was declared as long as the mac....